One key reason for Statoil’s reluctance to rush into Arctic offshore operations is the cost involved. Shell has spent approximately $5 billion on equipment and preparations, only to see its state of the art oil spill response equipment “crushed like a beer can” in a routine test off Puget Sound. And both of the company’s specialized Arctic drilling rigs were so badly damaged in accidents last year that Shell will tow them to Asia for substantial repairs — delaying its own exploration plans until at least 2014.

By Climate Guest Blogger on Mar 9, 2013 at 11:17 am

By Kiley Kroh

This week a top executive with Norway-based Statoil said it would be willing to walk away from Arctic offshore drilling if exploration in the harsh and remote environment proves too risky.

In an interview at the IHS CERAWeek conference in Houston, Tim Dodson, Statoil’s executive vice president of global exploration, acknowledged the numerous challenges associated with Arctic offshore drilling and reiterated his company’s cautious approach to exploration in the region.

After spending $23 million on Chukchi Sea leases in 2008, Statoil had planned to begin drilling in 2014, but delayed those plans by a year after watching Shell’s struggle to comply with safety and environmental standards and navigate the challenging conditions — all before drilling into any oil-bearing zones. Now, Dodson said, that may be pushed back even further:

We’ve [said] we wouldn’t drill before 2015. Whether that means we drill in 2015, or maybe not until 2016 or whether we’d drill at all, I think maybe the jury’s still a little bit out on that.

One key reason for Statoil’s reluctance to rush into Arctic offshore operations is the cost involved. Shell has spent approximately $5 billion on equipment and preparations, only to see its state of the art oil spill response equipment “crushed like a beer can” in a routine test off Puget Sound. And both of the company’s specialized Arctic drilling rigs were so badly damaged in accidents last year that Shell will tow them to Asia for substantial repairs — delaying its own exploration plans until at least 2014.

In the aftermath of Shell’s debacles, the Department of the Interior is nearing the end of a 60-day review of the company’s Arctic Ocean drilling program, the results of which are expected as soon as the end of this week.

While the potential for reward may be great, the risk of Arctic offshore drilling is tremendous. First, the remoteness of the region and its glaring lack of infrastructure necessary to respond to a potential oil spill or marine accident significantly complicate the industry’s ability to prove its preparedness. Next, the volatile conditions in which any company would be operating — including long periods of darkness, fog, hurricane-force winds, massive swells, and ice-infested waters for the majority of the year — further compromises safety and preparedness.

And the private sector has taken notice. Insurance giant Lloyd’s of London released a report last year warning companies that responding to an oil spill in a region “highly sensitive to damage” would present “multiple obstacles, which together constitute a unique and hard-to-manage risk.” German Bank WestLB announced last year that it would not provide financing to any offshore oil or gas drilling in the region, saying “the risks and costs are simply too high.” And Total SA, the fifth largest oil and gas company in the world, announced it wouldn’t seek to drill in the Arctic because an accident there would be a “disaster.”

Despite Shell’s temporary hiatus and Statoil’s caution, the debate over oil and gas exploration in the U.S. Arctic Ocean is far from over. Both Shell and ConocoPhillips have affirmed their intention to begin exploratory drilling in 2014. As the Center for American Progress’ Chair John Podesta stated in reaction to Shell’s recent announcement, “One company hitting the pause button will not mitigate the risks involved; the Department of the Interior should hit the stop button to prevent any oil and gas drilling from taking place in the Arctic Ocean.”

Kiley Kroh is the Associate Director for Ocean Communications at the Center for American Progress.

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singapore love: Rumor on the street is the Shell Vito project is over a year behind schedule, AND Shell plans to double down and award Whale to the same contractors in the coming weeks.
Must be some serious love going on between the Singaporeans and Shell decision makers....

Bonus Group: To uscitizen,
BRAZIL:
'PS - Shell is investing 2 billion a year into Brazil and already paying off'. Assuming $2Bn (you did not quote currency), that would just about cover Shell's share of the costs of replicants, operating expenses and of course managers' BONUSES!
$2Bn would represent approximately 10% of Shell's income in 2018.
https://reports.shell.com/annual-report/2018/consolidated-financial-statements/statement-of-cash-flows.php
FPSO unit cost: our initial case ($91bn total capex) assumed a cost of $2.5 billion for each of 13 FPSO units. However, our research shows a wide range of possibilities for this cost depending on the vessel configuration; plus the fact that Brazilian shipyards should get better at building them so the cost could reduce over time. Also the project might choose to lease rather than buy the FPSOs outright, which could improve economics for the consortium depending on the lease terms.
http://openoil.net/wp/wp-content/uploads/2016/12/OO_br_Libra_narrative_1.0_161104.pdf

uscitizen: Bonus group, Contradict myself - lol. Poor guy - like I said do your own research - tell us what you find, you will look like the irrational uneducated poster you are. PS - Shell is investing 2 billion a year into Brazil and already paying off. Do you ever look anything up?

Bonus Group: To US Citizen. Thank you for your post of September 9th 2019 20:12. Congratulations on also being an avid reader of this blog. You are correct in my post of June 26th 2019 23:05 I did say that '..Shell had a ‘fire sale’ of a plethora of BG ‘dross’ assets in order to raise $30Bn to disguise the amount by which they had overpaid for BG Group.' More correctly, Shell had a ‘fire sale’ including a plethora of BG ‘dross’ assets in order to raise $30Bn to disguise the amount by which they had overpaid for BG Group. This does not detract from the fact that Shell did have a 'fire sale' in order to raise $30Bn. By my estimation Shell over paid for BG Group by about 30%. The Christmas boxes were very large, but the presents were very small. You contradict yourself when you say that you will not do my homework for me, but then tell me that the split of the $30Bn assets sold was 80:20 Shell:BG. Is that correct? If so, thank you that just goes to show how worthless those BG assets were, but then that is what you can expect from a Cappuccino and Belgian chocolate lifestyle company. Any comments about what the Brazil Asset are up to these days?

uscitizen: To Bonus Group - the large percentage of assets sold by Shell were non BG assets. I will not do your homework for you, but the split is 80/20. A great example of why you do not take what this sites protagonists post as good information. But go ahead, say I am wrong and also posting garbage, do your research and tell me the number of BG asset sales vs the 30 billion Shell raised thru asset sales.

John Donovan: MESSAGE FROM JOHN FOR THE ATTENTION OF BOGUS GROUP. I have received the information you kindly sent and have replied by encrypted email.

Bill Campbell Prelude Comment: I might write in more detail but I find it rather ironic that it was this website that was telling the world 6 or so years ago that this installation did not have risk levels as low as claimed and one of the principal risk drivers was the compact nature of a hazardous substances plant with not enough space to swing a cat in. Unless you are not aware I wrote to Shell Australia at the time giving them data from 8 existing or planned onshore LNG plants which varied from 80 to 100 hectares or on average 20 to 22 times the footprint of Prelude, could they tell me as a stakeholder with shares in the Company how they arrived at their ridiculously low number but can guess I assume that a reasonable explanatory reply was not forthcoming, as sure as eggs are eggs if this plant is currently having problems or if it has problems or major accident events in future it will be due to the force fitting a complex plant, with risk levels much above which they have published, on a postage stamp of a footprint.
God willing they will never live to regret their fraudulent overly optimistic claims, risk is based on reality not wishful thinking.
Bill

Thanks. Problem is that it's behind a paywall and despite it being a great publication for the oil industry, none of us retired folk wants to invest in a subscription.

FURTHER REPLY FROM JOHN

I have received the further Prelude information you have kindly provided and have replied by encripted email.

Bonus Group: Further to Bogus Group's post yesterday. I am absolutely appalled that a Senior Executive of Royal Dutch Shell plc should spout so much nonsense concerning the Prelude installation. The statement is redolent of Malcolm Brinded and his 'Touch F*ck All' policy, which led to the deaths of Keith Moncrieff and Sean McCue on Brent Bravo on 11th September 2003. What is boring is the continuous misleading spin and blather from the top of this company and their lackadaisical approach to safety. 'Chronic Unease' is a well known expression in the Oil and Gas Industry, and that state of mind is far from boring or routine. In fact nothing is either boring or routine in Oil and Gas operations. Rob Jager moved last year to the post of VP Prelude after spending thirteen years as Country Chair and VP for Shell New Zealand/Shell Taranaki, after Shell announced the sale of its New Zealand interests in March 2018. Jager clearly previously has spent too much time being 'laid back' in the fantasy land of Lord of the Rings, marvelling at New Zealand's scenery and wondering who will be entertaining him for his next luxury seafood dinner accompanied by a glass of chilled expensive New Zealand Sauvignon Blanc.

Bogus Group: PLEASE SEE REPLY FROM JOHN WHICH FOLLOWS THE COMMENT FROM BOGUS GROUP
More on Prelude article in Upstream.

I’m stunned by what can only be described as idiotic statements. Nothing like the utopia of self-aggrandisement without verification. What is Jagers’ level of technical and operational capabilities? I recall similar rhetoric from BG Group charlatans, with the “best in class” mentality and use of the most overstated expression ever to be used outside the education sector, all aimed at pleasing their taskmasters.
Ramp-up of Prelude and what Jager hopes will be decades of “uneventful” and “boring” operation.
“This will be a state where little or nothing happens. We have few if any alarms, no surprises and where things are running like clock work and we are effectively in autopilot,” he said.
“We will know when we have succeeded in this ambition because Prelude will be recognised as the most boring asset in Shell global portfolio our people will refer to it as the safest and most desirable place to work, and when the rest of the industry is knocking on our door to find out how we have achieved such a best in class outcome, especially for a facility as complex and unique as Prelude.”

REPLY FROM JOHN

Hello, I would be grateful if you could send me a copy of the article via [email protected] using an anonymous email address. I would pass it on to retired Shell EP experts for their assessment.

FG names Shell, Eni executives in $1bn bribery case – The Punch08 May 2019 11:43Google’Femi Asu with agency report
Royal Dutch Shell Plc and Eni SpA face additional corruption allegations over a Nigerian oil deal, after the Federal Government said in a London lawsuit that it believed a handful of executives, including Chief Executive …

FG names Shell, Eni executives in $1bn bribery case08 May 2019 08:09Punch Newspapers’Femi Asu with agency report
Royal Dutch Shell Plc and Eni SpA face additional corruption allegations over a Nigerian oil deal, after the Federal Government said in a London lawsuit that it believed a handful of executives, including Chief Executive …

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